Consolidated Balance Sheet Shimizu Corporation and its subsidiaries As at March 31, 2016 (Note 2) (Note 2) ASSETS Current Assets: Cash (Notes 9 and 10.2)) 176,482 189,167 $ 1,680,148 Notes and accounts receivable trade (Notes 5.3) and 10.2)) 472,367 548,925 4,875,438 Marketable securities (Notes 9, 10.2) and 11) 66,239 85,202 756,748 Real estate for sale (Notes 4.2)) 26,353 21,620 192,029 Costs on uncompleted construction contracts (Notes 4.2) and 5.3)) 63,232 84,518 750,672 Costs on uncompleted real estate development projects (Note 4.2)) 32,755 26,041 231,293 PFI projects and other inventories (Notes 4.2) and 5.3)) 63,748 57,983 515,000 Deferred tax assets (Note 14) 27,313 26,539 235,717 Other current assets 111,410 81,372 722,730 Less: Allowance for doubtful accounts (1,229) (976) (8,671) Total current assets 1,038,673 1,120,395 9,951,108 Non-Current Assets: Tangible fixed assets: Buildings and structures (Note 5.2)) 162,152 167,046 1,483,667 Machinery, equipment and vehicles (Note 5.2)) 55,030 58,675 521,146 Land (Notes 5.1) and 5.2)) 132,534 132,083 1,173,133 Construction in progress 4,165 2,719 24,157 Less: Accumulated depreciation (122,653) (129,142) (1,147,014) Total tangible fixed assets 231,229 231,382 2,055,090 Intangible fixed assets 4,281 4,274 37,964 Investments and other assets: Investment securities (Notes 5.2), 5.3),10.2) and 11) 409,927 349,447 3,103,716 Deferred tax assets (Note 14) 1,479 1,474 13,094 Other investments (Note 5.2)) 20,211 18,250 162,095 Less: Allowance for doubtful accounts (2,403) (2,288) (20,321) Total investments and other assets 429,215 366,884 3,258,584 Total non-current assets 664,725 602,541 5,351,639 Total assets 1,703,399 1,722,936 $15,302,747 The accompanying notes are an integral part of these financial statements. The accompanying notes are an integral part of these financial statements. LIABILITIES Current Liabilities: Notes and accounts payable trade (Notes 5.3) and 10.2)) 454,576 441,301 $ 3,919,548 Short-term borrowings (Notes 5.2), 10.2) and 20) 132,401 125,120 1,111,295 Current portion of non-recourse borrowings (Notes 5.3), 10.2) and 20) 7,511 9,458 84,007 Current portion of bonds payable (Notes 10.2) and 19) 25,000 222,044 Current portion of non-recourse bonds payable (Notes 5.3), 10.2) and 19) 2,101 668 5,933 Income taxes payable 22,423 19,520 173,374 Advances received on uncompleted construction contracts 86,690 102,916 914,082 Warranty reserve 3,228 3,799 33,749 Reserve for expected losses on construction contracts in process 29,042 22,950 203,838 Reserve for directors bonuses 51 176 1,563 Other current liabilities 92,535 116,664 1,036,190 Total current liabilities 830,562 867,576 7,705,627 Non-Current Liabilities: Bonds payable (Notes 10.2) and 19) 90,000 65,000 577,315 Convertible bond-type bonds with subscription rights to shares (Notes 10.2) and 19) 30,136 267,663 Non-recourse bonds payable (Notes 5.3), 10.2) and 19) 17,899 16,785 149,080 Long-term borrowings (Notes 10.2) and 20) 85,469 76,772 681,872 Non-recourse borrowings (Notes 5.3), 10.2) and 20) 40,197 43,542 386,734 Deferred tax liabilities (Note 14) 57,198 32,131 285,385 Deferred tax liabilities for revaluation reserve for land (Note 5.1)) 19,017 17,847 158,518 Reserve for expected losses on affiliates businesses 7,033 5,510 48,943 Net defined benefit liability (Note 13) 55,074 68,150 605,300 Other non-current liabilities 19,051 13,828 122,820 Total non-current liabilities 390,940 369,704 3,283,636 Total liabilities 1,221,502 1,237,281 10,989,263 NET ASSETS Shareholders Equity: Common stock, no par value Authorized: 1,500,000 thousand shares Issued: 788,514 thousand shares as at March 31, 2015 and 2016 74,365 74,365 660,496 Additional paid-in capital 43,143 43,155 383,300 Retained earnings 167,283 219,507 1,949,621 Less: Treasury stock, at cost 3,928 thousand shares as at March 31, 2016 (1,571) (13,960) Less: Treasury stock, at cost 3,890 thousand shares as at March 31, 2015 (1,533) Total shareholders equity 283,259 335,457 2,979,458 Accumulated Other Comprehensive Income: Net unrealized gain (loss) on other securities, net of taxes (Note 11) 169,474 131,849 1,171,056 Deferred gain (loss) on hedging, net of taxes (Note 12) 41 15 137 Revaluation reserve for land, net of taxes (Note 5.1)) 25,667 26,293 233,533 Foreign currency translation adjustments 1,758 756 6,720 Remeasurements of defined benefit plans (3,291) (13,656) (121,297) Total accumulated other comprehensive income 193,649 145,258 1,290,150 Non-controlling Interests 4,987 4,939 43,875 Total net assets 481,896 485,655 4,313,484 Total liabilities and net assets 1,703,399 1,722,936 $15,302,747 68 SHIMIZU Corporate Report 2016 SHIMIZU Corporate Report 2016 69
Consolidated Statement of Income Consolidated Statement of Comprehensive Income Shimizu Corporation and its subsidiaries (Note 2) Shimizu Corporation and its subsidiaries (Note 2) Net Sales: Construction contracts (Notes 4.11) and 6.1)) 1,444,843 1,516,054 $13,465,270 Real estate development and other 123,000 148,879 1,322,312 1,567,843 1,664,933 14,787,582 Cost of Sales: Construction contracts (Note 6.2)) 1,338,723 1,357,546 12,057,430 Real estate development and other (Note 6.3)) 106,121 132,012 1,172,510 1,444,845 1,489,559 13,229,941 Gross profit: Construction contracts 106,119 158,508 1,407,839 Real estate development and other 16,878 16,866 149,802 122,998 175,374 1,557,641 Selling, General and Administrative Expenses (Note 6.4)) 72,966 80,706 716,819 Operating income 50,032 94,668 840,822 Non-Operating Income (Expenses): Interest and dividend income 5,038 5,632 50,029 Interest expenses (3,327) (3,171) (28,171) Equity in earnings of affiliates 1,629 1,094 9,724 Foreign exchange gain(loss) 2,353 (1,859) (16,516) Other, net 520 (862) (7,663) Ordinary income 56,246 95,501 848,224 Special Gains (Losses): Gain on sales of fixed assets (Note 6.6)) 3,170 734 6,520 Loss on sales of fixed assets (Note 6.7)) (110) (223) (1,987) Loss on affiliates businesses (3,623) (2,406) (21,378) Income before income taxes 55,682 93,605 831,379 Provision for Income Taxes (Note 14): Current 25,826 32,402 287,788 Deferred (4,276) 1,541 13,687 21,550 33,943 301,475 Net Income 34,131 59,661 529,904 Net Income attributable to non-controlling interests 734 339 3,014 Net Income attributable to shareholders of the Corporation 33,397 59,322 $ 526,889 The accompanying notes are an integral part of these financial statements. Net income 34,131 59,661 $529,904 Other Comprehensive Income: Net unrealized gain (loss) on other securities,net of taxes 68,084 (37,570) (333,689) Deferred gain (loss) on hedging, net of taxes 69 (10) (97) Revaluation reserve for land, net of taxes 1,948 994 8,835 Foreign currency translation adjustments 2,933 (1,252) (11,126) Remeasurements of defined benefit plans 4,007 (10,406) (92,428) Share of other comprehensive income of associates accounted for using equity method 153 (113) (1,005) Total other comprehensive income (Note 7) 77,197 (48,358) (429,511) Comprehensive Income 111,329 11,303 $100,392 Comprehensive income attributable to: Shareholders of the Corporation 110,257 11,299 $100,359 Non-controlling interests 1,072 3 33 The accompanying notes are an integral part of these financial statements. 70 SHIMIZU Corporate Report 2016 SHIMIZU Corporate Report 2016 71
Consolidated Statement of Changes in Net Assets Consolidated Statement of Cash Flows Shimizu Corporation and its subsidiaries Shimizu Corporation and its subsidiaries (Note 2) Shareholders Equity Accumulated Other Comprehensive Income Net unrealized Deferred Revaluation Foreign Remeasure- Additional gain (loss) on gain (loss) on reserve currency ments of Non- Common paid-in Retained Treasury other securities, hedging, for land, translation defined controlling Total stock capital earnings stock net of taxes net of taxes net of taxes adjustments benefit plans interests net assets Balance as at April 1, 2014 74,365 43,143 139,160 (1,507) 101,344 (30) 24,027 (891) (7,350) 3,786 376,048 Cumulative effects of changes in accounting policies (82) (82) Restated balance as at April 1, 2014 74,365 43,143 139,078 (1,507) 101,344 (30) 24,027 (891) (7,350) 3,786 375,966 Cash dividends paid ( 7.00 per share) (5,501) (5,501) Net income attributable to shareholders of the Corporation for the year 33,397 33,397 Reversal of revaluation reserve for land, net of taxes 309 309 Purchase and disposal of treasury stock, at cost 0 (25) (26) Changes other than shareholders equity 68,129 72 1,639 2,649 4,058 1,200 77,750 Balance as at April 1, 2015 74,365 43,143 167,283 (1,533) 169,474 41 25,667 1,758 (3,291) 4,987 481,896 Cumulative effects of changes in accounting policies Restated balance as at April 1, 2015 74,365 43,143 167,283 (1,533) 169,474 41 25,667 1,758 (3,291) 4,987 481,896 Cash dividends paid ( 9.50 per share) (7,466) (7,466) Net income attributable to shareholders of the Corporation for the year 59,322 59,322 Reversal of revaluation reserve for land, net of taxes 368 368 Purchase and disposal of treasury stock, at cost 0 (38) (39) Increase or decrease of shares of consolidated subsidiaries 11 (34) (23) Changes other than shareholders equity (37,625) (25) 626 (1,001) (10,365) (12) (48,404) Balance as at March 31, 2016 74,365 43,155 219,507 (1,571) 131,849 15 26,293 756 (13,656) 4,939 485,655 Shareholders Equity Accumulated Other Comprehensive Income (Note 2) Net unrealized Deferred Revaluation Foreign Remeasure- Additional gain (loss) on gain (loss) on reserve currency ments of Non- Common paid-in Retained Treasury other securities, hedging, for land, translation defined controlling Total stock capital earnings stock net of taxes net of taxes net of taxes adjustments benefit plans interests net assets Balance as at April 1, 2015 $660,496 $383,193 $1,485,776 $(13,615) $1,505,235 $367 $227,969 $15,615 (29,235) $44,299 $4,280,102 Cumulative effects of changes in accounting policies Restated balance as at April 1, 2015 $660,496 $383,193 $1,485,776 $(13,615) $1,505,235 $367 $227,969 $15,615 (29,235) $44,299 $4,280,102 Cash dividends paid ( 9.50 per share) (66,316) (66,316) Net income attributable to shareholders of the Corporation for the year 526,889 526,889 Reversal of revaluation reserve for land, net of taxes 3,271 3,271 Purchase and disposal of treasury stock, at cost 2 (344) (341) Increase or decrease of shares of consolidated subsidiaries 104 (308) (204) Changes other than shareholders equity (334,179) (230) 5,564 (8,894) (92,061) (115) (429,916) Balance as at March 31, 2016 $660,496 $383,300 $1,949,621 $(13,960) $1,171,056 $137 $233,533 $6,720 $(121,297) $43,875 $4,313,484 The accompanying notes are an integral part of these financial statements. The Corporation Law of Japan provides that an amount equal to 10% of the amount to be disbursed as distribution of capital surplus (other than the capital reserve) and retained earnings (other than the legal reserve) be transferred to the capital reserve and legal reserve, respectively, until the sum of the capital reserve and the legal reserve equals 25% of the capital stock account. Such distributions can be made at any time by resolution of the shareholders, or by the Board of Directors if certain conditions are met. The accompanying notes are an integral part of these financial statements. Cash Flows from Operating Activities: Income before income taxes 55,682 93,605 $ 831,379 Adjustments for: Depreciation and amortization 11,387 11,568 102,746 Increase (decrease) in allowance for doubtful accounts (3,455) (359) (3,196) Increase (decrease) in reserve for expected losses on construction contracts in process (259) (6,092) (54,113) Increase (decrease) in net defined benefit liability (1,775) (1,516) (13,469) Loss (gain) on sales of fixed assets (1,100) 219 1,948 Loss (gain) on sales of investment securities (1,958) (729) (6,477) Interest and dividend income (5,038) (5,632) (50,029) Interest expenses 3,327 3,171 28,171 (Increase) decrease in notes and accounts receivable trade 7,830 (76,836) (682,441) (Increase) decrease in real estate for sale 4,620 4,733 42,040 (Increase) decrease in costs on uncompleted construction contracts (7,554) (21,308) (189,256) (Increase) decrease in uncompleted real estate development projects 10,015 6,714 59,637 (Increase) decrease in PFI projects and other inventories (679) 5,763 51,193 Increase (decrease) in notes and accounts payable trade 14,574 (12,014) (106,707) Increase (decrease) in advances received on uncompleted construction contracts (28,323) 16,493 146,490 Other, net 4,413 53,118 471,785 Subtotal 61,706 70,898 629,702 Interest and dividends received 5,379 6,220 55,247 Interest paid (3,288) (3,164) (28,103) Income taxes paid (7,691) (35,618) (316,355) Net cash provided by (used in) operating activities 56,105 38,335 340,489 Cash Flows from Investing Activities: Acquisition of tangible fixed assets (19,790) (16,006) (142,165) Proceeds from sales of tangible fixed assets 1,638 487 4,329 Acquisition of marketable securities and investment securities (3,803) (388) (3,451) Proceeds from sales of marketable securities and investment securities 2,669 2,647 23,518 Other, net 1,641 (791) (7,029) Net cash provided by (used in) investing activities (17,644) (14,051) (124,798) Cash Flows from Financing Activities: Net increase (decrease) in short-term borrowings 6,646 880 7,815 Proceeds from long-term borrowings 27,942 17,450 154,987 Repayments of long-term borrowings (51,252) (34,275) (304,429) Proceeds from non-recourse borrowings 3,402 13,444 119,406 Repayments of non-recourse borrowings (6,721) (8,152) (72,406) Proceeds from issuance of bonds 20,000 Proceeds from issuance of non-recourse bonds 20,000 Redemption of non-recource bonds (2,547) (22,621) Proceeds from issuance of convertible bond-type bonds with subscription rights to shares 30,150 267,785 Dividends (5,501) (7,466) (66,316) Other, net (208) (282) (2,511) Net cash provided by (used in) financing activities 14,305 9,199 81,710 Effect of exchange rate changes on Cash and Cash Equivalents 5,339 (1,798) (15,977) Net increase (decrease) in Cash and Cash Equivalents 58,106 31,685 281,423 Cash and Cash Equivalents at beginning of year 183,440 242,482 2,153,677 Increase (decrease) in Cash and Cash Equivalents resulting from Change of Scope of Consolidation 935 Cash and Cash Equivalents at end of year (Note 9) 242,482 274,167 $2,435,100 72 SHIMIZU Corporate Report 2016 SHIMIZU Corporate Report 2016 73
Shimizu Corporation and its subsidiaries 1. Basis of Presentation of Consolidated Financial Statements 2. U.S. Dollar Amounts 3. Principles of Consolidation The accompanying consolidated financial statements have been prepared based on the accounts maintained by Shimizu Corporation (the Corporation ) and its subsidiaries (collectively the Group ) prepared in accordance with accounting principles generally accepted in Japan, which are different in certain respects as to the application and disclosure requirements of International Financial Reporting Standards, and are compiled from the consolidated financial statements prepared by the Corporation as required by the Financial Instruments and Exchange Law of Japan. The accounts of consolidated financial statements presented herein are expressed in Japanese yen by rounding down to the nearest million. The U.S. dollar amounts shown in the accompanying consolidated financial statements and notes thereto have been translated from the original Japanese yen into U.S. dollars on the basis of 112.59 to U.S.$1, the rate of exchange prevailing at March 31, 2016, and have been then rounded down to the nearest thousand. These U.S. dollar amounts are not intended to imply that the Japanese yen amounts have been or could be converted, realized or settled in U.S. dollars at this or any other rate. 1) Scope of Consolidation The Corporation had 60 subsidiaries as at March 31, 2016. The consolidated financial statements for the year ended March 31, 2016 include the accounts of the Corporation and all subsidiaries. The Corporation had 13 affiliates as at March 31, 2016. As at March 31, 2016, the equity method was applied to all affiliates. 2) Financial Statements of Subsidiaries The financial year-end of 11 overseas subsidiaries and 2 domestic subsidiaries is December 31, and the financial year-end of one domestic subsidiary is March 26. Consolidation of these subsidiaries is therefore performed by using their financial statements as at December 31 and March 26, respectively, and certain adjustments are made to reflect any significant transactions during the period from year-end balance sheet dates for these subsidiaries to March 31. 3) Amortization of Goodwill Goodwill is principally amortized over a five-year period on a straight-line basis from the year of acquisition. 4) Elimination of Unrealized Intercompany Profits All significant unrealized intercompany profits included in assets such as Costs on uncompleted construction contracts among the Group has been eliminated on consolidation and the portion thereof attributable to non-controlling interests is reported as Non-controlling Interests. In connection with the elimination of unrealized intercompany profits, the depreciation expense is also adjusted to eliminate any profit from the cost of assets purchased through intercompany transactions. 4. Summary of Significant Accounting Policies 1) Valuation of Securities The Group classifies securities into two different categories, held-to-maturity debt securities and other securities. The Group holds no trading securities. Held-to-maturity debt securities are valued at amortized cost. Other securities with market quotations are valued at the prevailing market price as at the balance sheet date. Other securities without market quotations are stated at cost, cost being determined by the moving average method. Net unrealized gains on other securities with market quotations are reported net of taxes as a separated component of Net Assets and the cost of sales is determined by the moving average method. 2) Valuation of Inventories Real estate for sale: At cost on an individual basis. (The carrying value of inventories on the balance sheet is presented at book value after write-down for decline in earnings) Costs on uncompleted construction contracts: At cost on an individual basis. Costs on uncompleted real estate development projects: At cost on an individual basis. (The carrying value of inventories on the balance sheet is presented at book value after write-down for decline in earnings) PFI projects and other inventories: At cost on an individual basis or at cost, cost being determined by the moving average method. (The carrying value of inventories on the balance sheet is presented at book value after write-down for decline in earnings) 3) Depreciation Method for Tangible Fixed Assets Depreciation for tangible fixed assets (excluding leased assets) is computed by the declining balance method, at rates based on the estimated useful lives of the assets. Some subsidiaries use the straight-line method. 4) Allowance for Doubtful Accounts For receivables classified as normal, the allowance for doubtful accounts is provided based on a historical default ratio. For receivables classified as doubtful or bankrupt, the allowance for doubtful accounts is provided based on individual assessment on the probability of collection. 5) Warranty Reserve An allowance to cover the costs of repairs for damages related to completed construction work for which the Group is responsible is provided based on previous warranty experience. 6) Reserve for Expected Losses on Construction Contracts in Process An allowance is provided for estimated future losses related to the construction contracts in process. 7) Reserve for Directors Bonuses An allowance is provided for bonus payment to directors based on payment estimates. 8) Reserve for Expected Losses on Affiliates Businesses The reserve for expected losses on affiliated businesses as at the balance sheet date is determined based on estimated losses related to affiliated businesses. 9) Accounting Method for Retirement Benefits Net defined benefit liability has been recorded mainly at the amount calculated based on the projected benefit obligation and the fair value of the plan assets as at the balance sheet date. Method of attributing the projected benefit obligations to periods of service: Benefit formula basis Method used for Amortization of actuarial gain or loss: Straight-line method (10 years - amortized from the following financial year) Method used for Amortization of prior service cost: Straight-line method (10 years) Adoption of simplified methods in the Group: Some consolidated subsidiaries apply a simplified method to compute their net defined benefit liability and retirement benefit expenses. 10) Accounting for Hedging Hedging instruments are valued at fair value and accounted by using the deferral method of accounting. With regard to some interest rate swaps which meet certain requirements, the Group uses the special treatment, based on the short-cut method, assuming that there is no ineffectiveness in the hedging relationship between hedged items and hedging instruments. Hedging instruments: Derivative transactions (interest rate swaps, foreign exchange contracts and foreign exchange non-deliverable forward contracts) Hedged items: Assets and liabilities which are exposed to interest and foreign exchange market fluctuation risks. Hedging policy: Derivative transactions are used solely for hedging the risks associated with existing or future assets and liabilities. Derivative transactions are never entered into for the purpose of trading or speculation. 11) Recognizing Revenues and Costs of Construction Contracts Revenues and costs of construction contracts, of which the percentage of completion can be reliably estimated, are recognized by the percentage-of-completion method. The percentage of completion is calculated based on the cost incurred to date as a percentage of the estimated total cost. The completed-contract method is applied to all other construction contracts. 74 SHIMIZU Corporate Report 2016 SHIMIZU Corporate Report 2016 75
12) Consumption Taxes Consumption taxes payable or receivable are excluded from each account in the consolidated statements of income. 13) Foreign Currency Translation The balance sheet of overseas subsidiaries is translated into Japanese yen at the exchange rates prevailing at the balance sheet date except for shareholders equity which is translated at historical rates. The revenues and expenses of overseas subsidiaries are translated into Japanese yen at the exchange rates prevailing at the balance sheet date. Differences arising from such translations are shown as Foreign currency translation adjustments and are included in Net Assets. 14) Cash Flows Cash and cash equivalents in the consolidated statement of cash flows consist of cash on hand, bank deposits payable on demand, and time deposits, which are readily convertible into cash and subject to minor risks of fluctuations in value. 15) Income Taxes Income taxes of the Corporation and its domestic subsidiaries consist of corporate income taxes, local inhabitants taxes and enterprise taxes. The Corporation and its domestic subsidiaries account for deferred taxes in accordance with the regulations for preparation of consolidated financial statements in Japan. Deferred income taxes are determined using the asset and liability approach, whereby deferred tax assets and liabilities are recognized in respect of temporary differences between the tax basis of assets and liabilities and those as reported in the financial statements. In addition, the consolidated overseas subsidiaries provide for deferred income taxes relating to temporary differences between reporting for tax and accounting purposes in accordance with accounting principles generally accepted in the relevant countries. 16) Changes in Accounting Policies (Application of Accounting Standard for Business Combinations, etc.) Effective from the year ended March 31, 2016, the Corporation has applied the Accounting Standard for Business Combinations (ASBJ Statement No. 21,revised on September 13, 2013), the Accounting Standard for Consolidated Financial Statements (ASBJ Statement No. 22, revised on September 13, 2013), and the Accounting Standard for Business Divestitures (ASBJ Statement No. 7, revised on September 13, 2013), etc. As a result, the method of recording the difference resulting from changes in the Corporation ownership interests in subsidiaries when the Corporation retains control was changed to one in which it is recorded in capital surplus, and the method of recording acquisition-related costs was changed to one in which they are recognized as expenses for the fiscal year in which they are incurred. Furthermore, for the accounting treatment for business combinations carried out in or after the year ended March 31, 2016, the accounting method is changed to one in which the reviewed acquisition cost allocation resulting from the finalization of the provisional fair value is reflected in the consolidated financial statements for the fiscal year in which the business combination occured. In addition, the presentation method of net income attributable to shareholders of the Corporation was amended, and the presentation of minority interests was changed to non-controlling interests. To reflect these changes in presentation,the consolidated financial statements for the fiscal year ended March 31,2015 were reclassified. The application of the Accounting Standard for Business Combinations, etc. is in line with the transitional measures provided for in paragraph 58-2 (4) of the Accounting Standard for Business Combinations, paragraph 44-5 (4) of the Accounting Standard for Consolidated Financial Statements and paragraph 57-4 (4) of the Accounting Standard for Business Divestitures. These standards have been applied prospectively from the beginning of the year ended March 31, 2016. The impact on the consolidated financial statements for the year ended March 31, 2016 as a result of this change was immaterial. 5. Notes to Consolidated Balance Sheet 1) Revaluation Reserve for Land According to the Land Revaluation Law enacted on March 31, 1998, land used for business and owned by the Corporation was revalued on March 31, 2002 and an unrealized gain from the revaluation of land was reported as Revaluation reserve for land, net of taxes as a separate component of Net Assets and the relevant deferred tax liabilities were reported as Deferred tax liabilities for revaluation reserve for land as a separate component of Non-Current Liabilities. Such revaluation was allowed only at one specific time under the Law and cannot be undertaken at each financial year-end. According to the enforcement ordinance of the Law, there are several methods allowed to determine the revalued amount of land. The Corporation adopted a method of using the assessed value for property taxes with appropriate adjustments. 2) Assets Pledged as Collateral As at March 31 Assets pledged as collateral: Buildings and structures 349 $ Machinery, equipment and vehicles 101 Land 4,738 Total 5,189 $ Secured liabilities: Short-term borrowings 4,950 $ Total 4,950 $ The following assets, which are included above, are pledged as factory foundation collateral at subsidiaries for short-term borrowings. As at March 31 Assets pledged as collateral: Buildings and structures 72 $ Machinery, equipment and vehicles 101 Land 283 Total 458 $ Secured liabilities: Short-term borrowings 3,800 $ Total 3,800 $ The following assets are pledged as collateral for borrowings at affiliated companies and others. As at March 31 Investment securities 173 173 $1,536 Other investments 94 86 771 Total 267 259 $2,307 76 SHIMIZU Corporate Report 2016 SHIMIZU Corporate Report 2016 77
3) Other Notes to Consolidated Balance Sheet As at March 31 Contingent liabilities from guaranteeing indebtedness Guarantees for housing loans of employees 332 219 $1,953 As at March 31 The total amount of notes receivable discounted at consolidated subsidiaries 806 115 $1,027 As at March 31 The total amount of business assets pledged as collateral for Non-recourse borrowings by subsidiaries engaged in PFI business 54,862 60,193 $534,629 As at March 31 The total amount of business assets of subsidiaries engaged in the real estate development business corresponding to Non-recourse bonds payable 25,547 22,567 $200,441 As at March 31 Amount of Costs on uncompleted construction contracts, for which a construction loss is anticipated, matching with Reserve for expected losses on construction contracts in process. 118 2,004 $17,799 Note: Costs on uncompleted construction contracts for which a construction loss is anticipated and Reserve for expected losses on construction contracts in process are presented without being offset. As at March 31 Breakdown of PFI projects and other inventories Merchandise 673 668 $ 5,939 Materials and supplies 569 477 4,237 PFI and other projects 62,505 56,838 504,823 As at March 31 Investment securities Investments in affiliates 19,370 19,916 $176,897 6. Notes to Consolidated Statement of Income 1) Revenue recognized using the percentage-of-completion method were as follows: For the year ended March 31 Revenue recognized using the percentage-of-completion method 1,256,283 1,319,145 $11,716,367 2) Provision of reserve for expected losses on construction contracts in process included in cost of sales were as follows: For the year ended March 31 Provision of reserve for expected losses on construction contracts in process included in cost of sales 14,750 11,489 $102,045 3) Inventory write-down due to reduced profitability included in cost of sales were as follows: For the year ended March 31 Inventory write-down due to reduced profitability included in cost of sales 369 823 $7,310 4) The major components of Selling, General and Administrative Expenses were as follows: For the year ended March 31 Salaries and allowances to employees 23,550 25,927 $230,285 Retirement benefit expenses for employees 1,973 1,749 15,537 5) Research and development costs (included in construction costs and general and administrative expenses) were as follows: For the year ended March 31 Research and development costs 11,170 8,557 $76,001 6) Gain on sales of fixed assets were as follows: For the year ended March 31 Land 733 $ Investment securities 2,031 729 6,477 Others 405 4 42 7) Loss on sales of fixed assets were as follows: For the year ended March 31 Land 33 213 $1,900 Investment securities 72 Others 4 9 87 78 SHIMIZU Corporate Report 2016 SHIMIZU Corporate Report 2016 79
7. Notes to Consolidated Statement of Comprehensive Income 8. Notes to Consolidated Statement of Changes in Net Assets Reclassification adjustments and tax effects related to other comprehensive income were as follows: For the year ended March 31 Net unrealized gain (loss) on other securities, net of taxes Gains (losses) arising during the year 93,595 (58,641) $(520,842) Reclassification adjustments (987) (662) (5,880) Total before tax effect 92,607 (59,303) (526,722) Tax effect (24,523) 21,733 193,033 Net unrealized gain (loss) on other securities, net of taxes 68,084 (37,570) (333,689) Deferred gain(loss) on hedging, net of taxes Gains arising during the year 77 43 $ 387 Reclassification adjustments 28 (77) (686) Total before tax effect 105 (33) (299) Tax effect (35) 22 202 Deferred gain (loss) on hedging, net of taxes 69 (10) (97) Revaluation reserve for land, net of taxes Tax effect 1,948 994 $ 8,835 Foreign currency translation adjustments Gains (losses) arising during the year 2,933 (1,252) $ (11,126) Reclassification adjustments Foreign currency translation adjustments 2,933 (1,252) (11,126) Remeasurements of defined benefit plans, net of taxes Gains (losses) arising during the year 3,957 (16,233) $(144,181) Reclassification adjustments 2,328 1,581 14,046 Total before tax effect 6,285 (14,651) (130,135) Tax effect (2,278) 4,245 37,707 Remeasurements of defined benefit plans, net of taxes 4,007 (10,406) (92,428) Share of other comprehensive income of associates accounted for using equity method Gains (losses) arising during the year 167 (129) $ (1,154) Reclassification adjustments (14) 16 148 Share of other comprehensive income of associates accounted for using equity method 153 (113) (1,005) Total other comprehensive income 77,197 (48,358) $(429,511) 1) Type and number of outstanding shares For the year ended March 31, 2015 Number of shares (Thousands) Balance at Increase in shares Decrease in shares Balance at Type of shares beginning of year during the year during the year end of year Issued stock: Common stock 788,514 788,514 Treasury stock: Common stock 3,857 33 0 3,890 Notes: 1. The increase in 33 thousand shares of treasury stock is mainly due to the purchase of shares in quantities less than the minimum trading unit of shares. 2. The decrease in 0 thousand shares of treasury stock is due to the sale of shares in quantities less than the minimum trading unit of shares. Number of shares (Thousands) Balance at Increase in shares Decrease in shares Balance at Type of shares beginning of year during the year during the year end of year Issued stock: Common stock 788,514 788,514 Treasury stock: Common stock 3,890 39 0 3,928 Notes: 1. The increase in 39 thousand shares of treasury stock is mainly due to the purchase of shares in quantities less than the minimum trading unit of shares. 2. The decrease in 0 thousand shares of treasury stock is due to the sale of shares in quantities less than the minimum trading unit of shares. 2) Dividends (1) Dividends paid to shareholders For the year ended March 31, 2015 Amount Amount Type of (Millions per share Shareholders Effective Resolution approved by shares of Yen) (Yen) cut-off date date Annual general meeting of Common March 31, June 30, shareholders (June 27, 2014) stock 2,750 3.50 2014 2014 Board of directors Common September 30, December 2, (November 10, 2014) stock 2,750 3.50 2014 2014 Amount Amount Amount Amount Type of (Millions ( per share per share Shareholders Effective Resolution approved by shares of Yen) ) (Yen) () cut-off date date Annual general meeting of Common March 31, June 29, shareholders (June 26, 2015) stock 3,536 $31,413 4.50 $0.04 2015 2015 Board of directors Common September 30, December 2, (November 9, 2015) stock 3,929 $34,902 5.00 $0.04 2015 2015 80 SHIMIZU Corporate Report 2016 SHIMIZU Corporate Report 2016 81
(2) Dividends with a shareholders cut-off date during the current fiscal year but an effective date subsequent to the current fiscal year For the year ended March 31, 2015 Amount Amount Type of (Millions per share Shareholders Effective Resolution approved by shares Paid from of Yen) (Yen) cut-off date date Annual general meeting of shareholders Common Retained March 31, June 29, (June 26, 2015) stock earnings 3,536 4.50 2015 2015 Amount Amount Amount Amount Type of (Millions ( per share per share Shareholders Effective Resolution approved by shares Paid from of Yen) ) (Yen) (U.S.Dollars) cut-off date date Annual general meeting of shareholders Common Retained March 31, June 30, (June 29, 2016) stock earnings 8,645 $76,784 11.00 $0.09 2016 2016 Notes: Dividend per share of 11.00 were included special dividend of 6.00. 9. Notes to Consolidated Statement of Cash Flows 10. Financial Instruments The reconciliation between cash and cash equivalents reported in the consolidated statement of cash flows and amounts reported in the consolidated balance sheet is as follows: As at March 31 Cash (as per consolidated balance sheet) 176,482 189,167 $1,680,148 Marketable securities (Negotiable certificate of deposit) 66,000 85,000 754,951 Cash and cash equivalents 242,482 274,167 $2,435,100 1) Overview (1) Policy for financial instruments The Group raises operating funds primarily through bank borrowings and bond issues. Temporary fund surpluses are managed principally through short-term deposits with little risk. Under the Group s policy, the Group uses derivatives only for the purpose of reducing risks by hedge, and not for speculative purposes. (2) Types of financial instruments, risk and risk management Regarding credit risk associated with customer s operating receivables such as notes receivable and accounts receivable from construction contracts, the Group appropriately reduces such risk in response to the payment conditions and customer s credit situation. Regarding investment securities held primarily for the purpose of maintaining business relationships, the Group regularly evaluates the rationale for of undertaking acquisitions while comprehensively considering the benefit from improving relationships with customers and the risk of price fluctuation of the investment securities,and it reconsiders the holding purpose on an ongoing basis after the acquisition from the same perspectives. Regarding volatility risk of foreign exchange rates and interest rates, the Group conducts market risk management in line with its risk management rules for volatility in financial markets. The Group manages liquidity risk associated with raising funds by appropriately planning fund raising based on a three-month cash flow projection prepared monthly and the fiscal year s cash flow projection. (3) Supplementary explanation on fair value of financial instruments The fair value of financial instruments is based on market value or reasonable estimate if there is no market value. Since certain assumptions are used for estimating values, values could be different if different assumptions are applied. In addition, the derivative contract amounts described in Derivatives (Note 12) are not indicative of the actual market risk involved in derivative transactions. 2) Estimated fair value of financial instruments The carrying value of the financial instruments on the consolidated balance sheet as at March 31, 2015 and 2016, and estimated fair value are shown below. The following table does not include financial instruments for which it is extremely difficult to determine the fair value. As at March 31, 2015 Carrying value Fair value Difference Assets (1) Cash 176,482 176,482 (2) Notes and accounts receivable trade 472,367 472,303 (63) (3) Marketable securities 66,239 66,239 (4) Investment securities 370,438 370,438 Liabilities (5) Notes and accounts payable trade 454,576 454,576 (6) Short-term borrowings 132,401 132,401 (7) Bonds payable and current portion of bonds payable 90,000 91,344 1,344 (8) Convertible bond-type bonds with subscription rights to shares (9) Non-recourse bonds payable and current portion of non-recourse bonds payable 20,000 20,000 (10) Long-term borrowings 85,469 86,545 1,075 (11) Non-recourse borrowings and current portion of non-recourse borrowings 47,709 49,260 1,551 Derivative transactions(*) (12) Derivative transactions Hedge accounting not applied (264) (264) Hedge accounting applied 77 77 As at March 31, 2016 Carrying value Fair value Difference Assets (1) Cash 189,167 189,167 (2) Notes and accounts receivable trade 548,925 548,925 (3) Marketable securities 85,202 85,202 (4) Investment securities 316,643 316,643 Liabilities (5) Notes and accounts payable trade 441,301 441,301 (6) Short-term borrowings 125,120 125,120 (7) Bonds payable and current portion of bonds payable 90,000 91,259 1,259 (8) Convertible bond-type bonds with subscription rights to shares 30,136 31,929 1,792 (9) Non-recourse bonds payable and current portion of non-recourse bonds payable 17,453 17,453 (10) Long-term borrowings 76,772 78,467 1,695 (11) Non-recourse borrowings and current portion of non-recourse borrowings 53,000 55,235 2,234 Derivative transactions(*) (12) Derivative transactions Hedge accounting not applied (20) (20) Hedge accounting applied 43 43 82 SHIMIZU Corporate Report 2016 SHIMIZU Corporate Report 2016 83
As at March 31, 2016 Carrying value Fair value Difference Assets (1) Cash $1,680,148 $1,680,148 $ (2) Notes and accounts receivable trade 4,875,438 4,875,438 (3) Marketable securities 756,748 756,748 (4) Investment securities 2,812,356 2,812,356 Liabilities (5) Notes and accounts payable trade 3,919,548 3,919,548 (6) Short-term borrowings 1,111,295 1,111,295 (7) Bonds payable and current portion of bonds payable 799,360 810,542 11,182 (8) Convertible bond-type bonds with subscription rights to shares 267,663 283,586 15,923 (9) Non-recourse bonds payable and current portion of non-recourse bonds payable 155,013 155,013 (10) Long-term borrowings 681,872 696,929 15,056 (11) Non-recourse borrowings and current portion of non-recourse borrowings 470,742 490,589 19,847 Derivative transactions(*) (12) Derivative transactions Hedge accounting not applied (183) (183) Hedge accounting applied 387 387 (*) Assets and liabilities that arise from derivative transactions are presented on a net basis. When the total amount becomes a net liability, the amount is indicated in parenthesis. Notes: 1. Method to determine the estimated fair value of financial instruments (1) Cash, (3) Marketable securities, (5) Notes and accounts payable trade, (6) Short-term borrowings The Corporation uses carrying value for these amounts because they will be settled in the short term, meaning that carrying value approximate fair value. (2) Notes and accounts receivable trade By receivables with separate fixed terms, the fair value is calculated by applying a discount rate determined taking into account the term of collection and the credit risk. (4) Investment securities The fair value of stocks is determined based on the stock market price and the fair value of bonds is determined based on the stock market price or prices quoted by financial institutions. Among Investment securities, non-listed shares, etc. ( 32,804 million ($291,360 thousand) in the consolidated balance sheets as at March 31, 2016 ( 39,488 million as at March 31, 2015) ) are not included in the above because determining the fair value for them is extremely difficult. (7) Bonds payable and current portion of bonds payable, (8) Convertible bond-type bonds with subscription rights to shares The fair value of the bonds issued by the Corporation is based on the prevailing market price. (9) Non-recourse bonds payable and current portion of non-recourse bonds payable Carrying value is used as fair value as there is a variable interest rate and the value is reviewed on a short term basis to reflect the market interest rate, meaning that carrying value approximate fair value. (10) Long-term borrowings, (11) Non-recourse borrowings and current portion of non-recourse borrowings The fair value of long-term borrowings and non-recourse borrowings are estimated by applying a discount rate to be applied to the total of principal and interest if a similar new borrowings agreement would be entered into. Some long-term borrowings and non-recourse borrowings are subject to special treatment of interest rate swap, and these are calculated by applying a discount rate to be applied to the total principal and interest with the consideration of the underlying interest rate swap if a similar new borrowings agreement would be entered into. (12) Derivative transactions The fair value of derivative transactions is valued from prices quoted by financial institutions. 2. Anticipated redemption amount after balance sheet date for monetary assets and securities with maturities. Over 1 year As at March 31, 2015 Less than 1 year less than 5 years Over 5 years Cash 176,482 Notes and accounts receivable trade 453,551 18,784 31 Marketable securities and investment securities Other marketable securities with maturities Bonds Corporate Bonds 1,239 482 Other (negotiable certificate of deposit) 66,000 Total 697,273 19,266 31 Over 1 year As at March 31, 2016 Less than 1 year less than 5 years Over 5 years Cash 189,167 Notes and accounts receivable trade 539,634 9,290 Marketable securities and investment securities Other marketable securities with maturities Bonds Corporate Bonds 202 301 Other (negotiable certificate of deposit) 85,000 Total 814,004 9,592 Over 1 year As at March 31, 2016 Less than 1 year less than 5 years Over 5 years Cash $1,680,148 $ $ Notes and accounts receivable trade 4,792,918 82,520 Marketable securities and investment securities Other marketable securities with maturities Bonds Corporate Bonds 1,795 2,675 Other (negotiable certificate of deposit) 754,951 Total $7,229,814 $85,195 $ 84 SHIMIZU Corporate Report 2016 SHIMIZU Corporate Report 2016 85
3. Repayment schedule for short-term borrowings, bonds payable and current portion of bonds payable, convertible bondtype bonds with subscription rights to shares, non-recourse bonds payable and current portion of non-recourse bonds payable, long-term borrowings and non-recourse borrowings and current portion of non-recourse borrowings after each fiscal year end. Over 1 year Over 2 years Over 3 years Over 4 years Less than less than less than less than less than As at March 31, 2015 1 year 2 years 3 years 4 years 5 years Over 5 years Short-term borrowings 132,401 Bonds payable 25,000 15,000 10,000 20,000 20,000 Convertible bond-type bonds with subscription rights to shares Non-recourse bonds payable and current portion of non-recourse bonds payable 2,101 668 17,231 Long-term borrowings 23,466 18,338 16,656 11,732 15,275 Non-recourse borrowings and current portion of non-recourse borrowings 7,511 7,544 5,904 4,792 4,471 17,484 Total 142,013 56,678 56,473 31,449 36,204 52,760 Over 1 year Over 2 years Over 3 years Over 4 years Less than less than less than less than less than As at March 31, 2016 1 year 2 years 3 years 4 years 5 years Over 5 years Short-term borrowings 125,120 Bonds payable and current portion of bonds payable 25,000 15,000 10,000 20,000 10,000 10,000 Convertible bond-type bonds with subscription rights to shares 30,000 Non-recourse bonds payable and current portion of non-recourse bonds payable 668 16,785 Long-term borrowings 20,800 19,119 14,134 9,955 12,761 Non-recourse borrowings and current portion of non-recourse borrowings 9,458 7,185 6,074 5,752 5,431 19,098 Total 160,247 59,770 35,193 39,887 55,387 41,860 11. Securities Over 1 year Over 2 years Over 3 years Over 4 years Less than less than less than less than less than As at March 31, 2016 1 year 2 years 3 years 4 years 5 years Over 5 years Short-term borrowings $1,111,295 $ $ $ $ $ Bonds payable and current portion of bonds payable 222,044 133,226 88,817 177,635 88,817 88,817 Convertible bond-type bonds with subscription rights to shares 266,453 Non-recourse bonds payable and current portion of non-recourse bonds payable 5,933 149,080 Long-term borrowings 184,747 169,811 125,543 88,422 113,348 Non-recourse borrowings and current portion of non-recourse borrowings 84,007 63,817 53,948 51,092 48,244 169,631 Total $1,423,280 $530,872 $312,577 $354,271 $491,938 $371,797 1) Other securities (with market value) As at March 31, 2015 Book value Acquisition cost Difference Securities with unrealized gains Stocks 369,824 124,890 244,934 Sub total 369,824 124,890 244,934 Securities with unrealized losses Stocks 613 660 (46) Corporate bonds 239 239 Other 66,000 66,000 Sub total 66,852 66,899 (46) Total 436,677 191,789 244,887 As at March 31, 2016 Book value Acquisition cost Difference Securities with unrealized gains Stocks 299,678 113,124 186,554 Sub total 299,678 113,124 186,554 Securities with unrealized losses Stocks 16,964 17,934 (970) Corporate bonds 202 202 Other 85,000 85,000 Sub total 102,166 103,137 (970) Total 401,845 216,261 185,584 86 SHIMIZU Corporate Report 2016 SHIMIZU Corporate Report 2016 87
12. Derivatives As at March 31, 2016 Book value Acquisition cost Difference Securities with unrealized gains Stocks $2,661,682 $1,004,744 $1,656,938 Sub total 2,661,682 1,004,744 1,656,938 Securities with unrealized losses Stocks 150,673 159,293 (8,619) Corporate bonds 1,795 1,795 Other 754,951 754,951 Sub total 907,421 916,041 (8,619) Total $3,569,103 $1,920,785 $1,648,318 2) Other securities sold For the year ended March 31, 2015 Sales amount Total gain on sales Total loss on sales Shares 2,630 2,031 Sales amount Total gain on sales Total loss on sales Shares 2,647 729 Sales amount Total gain on sales Total loss on sales Shares $23,518 $6,477 $ 1) Derivative transactions to which hedge accounting is not applied (1) Currency-related transactions As at March 31, 2015 Valuation Contract Contract gains and Segmentation Transaction type amount over 1 year Fair value losses Off-market Foreign exchange transactions forward contract Sell U.S. dollar/ Buy Yen 35,778 (264) (264) Total 35,778 (264) (264) Note: The fair value of derivative transactions is determined based on prices quoted by financial institutions. As at March 31, 2016 Valuation Contract Contract gains and Segmentation Transaction type amount over 1 year Fair value losses Off-market transactions As at March 31, 2016 Foreign exchange forward contract Sell U.S. dollar/ Buy Yen 33,676 (20) (20) Total 33,676 (20) (20) Valuation Contract Contract gains and Segmentation Transaction type amount over 1 year Fair value losses Off-market transactions Foreign exchange forward contract Sell U.S. dollar/ Buy Yen $299,110 $ $(183) $(183) Total $299,110 $ $(183) $(183) Note: The fair value of derivative transactions is determined based on prices quoted by financial institutions. 2) Derivative transactions to which hedge accounting is applied (1) Currency-related transactions As at March 31, 2015 Contract Contract Hedging method Transaction type Main hedged item amount over 1 year Fair value Deferred hedge Foreign exchange Forecasted foreign method forward contract currency transactions Buy U.S. dollar/ Sell Yen 1,466 144 Sell Singapore dollar/ Buy Yen 1,910 1,910 (72) Non-Deliverable- Forward (NDF) Buy Philippine Peso/ Sell Yen 64 64 4 Note: The fair value of derivative transactions is determined based on prices quoted by financial institutions. As at March 31, 2016 Contract Contract Hedging method Transaction type Main hedged item amount over 1 year Fair value Deferred hedge Foreign exchange Forecasted foreign method forward contract currency transactions As at March 31, 2016 Buy Euro/ Sell Thai Baht 500 33 Buy U.S. dollar/ Sell Yen 696 222 25 Buy British Pound/ Sell Yen 18 (2) Sell Singapore dollar/ Buy Yen 1,898 1,898 (13) Contract Contract Hedging method Transaction type Main hedged item amount over 1 year Fair value Deferred hedge Foreign exchange Forecasted foreign method forward contract currency transactions Buy Euro/ Sell Thai Baht $ 4,444 $ $ 296 Buy U.S. dollar/ Sell Yen 6,188 1,977 229 Buy British Pound/ Sell Yen 164 (21) Sell Singapore dollar/ Buy Yen 16,858 16,858 (117) Note: The fair value of derivative transactions is determined based on prices quoted by financial institutions. 88 SHIMIZU Corporate Report 2016 SHIMIZU Corporate Report 2016 89